Shopify Stock Falls After Q3 GMV and Subscription Revenue Miss Despite 32% Revenue Growth

SHOP delivered a quarter that grew fast but landed short of the most bullish expectations. Revenue rose 32% from a year earlier to $3.74 billion, according to the company's release, and adjusted earnings came to 49 cents per share, ahead of LSEG's 46-cent estimate. Whether revenue missed depends on whose consensus you use: it was just below LSEG's $3.75 billion, while Zacks and Investing.com counted it as in line with or slightly above forecasts.

The misses were in the engagement metrics. Gross merchandise volume of $119.15 billion fell short of the $120.03 billion StreetAccount estimate, subscription revenue of $836 million missed FactSet's $848.1 million, and subscription gross profit of $661 million came in about $20 million below forecasts, though merchant gross profit beat. Shares fell about 15% before the opening bell and were down about 7% during Tuesday's session. ZeroHedge called it the company's first revenue miss in four years and cited a Wells Fargo note on AI costs weighing on margins; on the earnings call, management attributed the year-over-year squeeze in subscription gross margin mainly to added AI spending on its Sidekick assistant.

Management pushed back on the slowdown narrative. President Harley Finkelstein called GMV growth "consistent" and "durable", noting it was the thirteenth straight quarter above 20%, and said AI shopping agents, including Meta's Muse, for which Shopify is an early partner, are bringing new traffic rather than lowering prices. Free cash flow was $816 million, a 22% margin, according to the company's release.

For the fourth quarter, Shopify guided revenue growth in the low thirties percent, roughly in line with LSEG's 32.1% estimate, with gross profit growing at a high-twenties rate. The holiday quarter will show whether GMV growth can re-accelerate and whether AI-related costs keep pressing on subscription margins.